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[Contn.] Why Senior Management Salaries Have Gone Flat! It's all in the structuring Wake up and smell the coffee: senior manager salaries in most sectors won't look up this year. In the software sector, the BT-Omam survey estimates that salaries will increase by just 15-18 per cent in 2001-02. Assuming inflation for the year at 6-7 per cent, that's an increase in terms of real wages of just 8-12 per cent. Some HR consultants expect the figure to be even lower. That makes things easy for companies which do not have to worry about issues related to recruiting or retaining employees.
The great white hope takes the form of sectors like telecom, where companies still think they can make a go of it, consumer durables, where the second half of the year traditionally brings good news in the form of increased sales, banking, insurance, and biotech, the new golden triangle, and fast moving consumer goods. Indeed, in 2000-2001 senior manager salaries in the FMCG sector were the highest and they are expected to grow by an average of 20-22 per cent this year. The move to performance-based pay, or variable-pay, as some companies call it, has only become more pronounced in India Inc.. Most increments are structured into the variable component of the pay, not the fixed one. This means managers will literally have to earn their hikes. And since the fixed component remains untouched, they do not benefit in future years from something they have done (or not done) this year. This makes great sense from a financial perspective: increments that take the form of variable pay, reward employees for their performance only as long as they continue to perform well. If their performance lags, the increment dries up and vanishes. At Bharti, the variable component of pay for senior managers is 30 per cent, and Khandpur claims this will go up to 50 per cent by 2003. Says Goyal: ''At the senior manager level, bonus and stock options form an intrinsic component of the compensation package.'' General managers and vice-presidents in Indian companies can also see some simplification in the way their salaries are structured. For one, more and more companies could give their senior managers a say in how their salaries are structured, as long as their cost to company remains the same. And with the tax-regime now decreeing that most perquisites are taxable, it makes sense for companies to move to a compensation structure devoid of tens of small allowances. ''Apart from housing and, maybe, conveyance, everything else will be scrapped and there will be one consolidated cheque payment,'' says Sangram Thambe, the Head of the HR function at tractor major M&M. Maybe that makes sense, but senior managers won't complain if it is accompanied by a significant increase in their salaries. Going by the survey and indications of the year ahead, they could well have to wait for fiscal 2003, for that to happen. -Survey
co-ordinated for BT by Seema Shukla. ''There's more pay at risk today'' The A.V. Birla Group's compensation philosophy
Salaries have not really stagnated. They have just ceased to show aggressive growth. In the Aditya Birla Group, as a conglomerate, we follow sectoral trends. We have always been moderate in our approach to compensation. We differentiate purely on the basis of performance. Salary structures are definitely changing; there's more pay at risk today than ever before. And multiple compensation-and incentive-structures are prevalent. Several companies are also looking at long-term incentives linked to performance. It is a myth that FMCG companies pay the best. It has always been a matter of relative growth of sectors. The telecom, infotech, and financial services sectors have been there, done that. Most FMCG companies are cash-rich and fairly well-entrenched in the market. They can thus retain their competitive edge over longer periods of time; this is reflected in their salaries, creating an illusion that they are always the highest paying companies. The promising sectors from a salary-growth point of view are entertainment, networking, communication, and infotech services. Salary-growth in the engineering sector will decline; so will that in consulting. At the 'very' senior level, our salaries are comparable to those in the West if you take the cost of living into account. There are variations across sectors. But India is less aggressive on the bonus front than the West. Percentage-increments are higher at junior levels. Turnover is higher at these levels; senior managers are more selective while changing careers. And inflation has a greater impact at the junior level then at the senior. Lifestyle aspirations are also strong today at the junior levels. Even young management trainees or young managers with two-to-three years of experience think in terms of owning a car. All these factors impact compensation strategies. ''We moved to individualised compensation in 1994'' An Infotech Story: Wipro's comp. strategy
We believe the performance of the business and the individual will increasingly dictate compensation-increases for employees. At Wipro, our compensation review for senior management happens in the last quarter of the calendar year. We have been moving towards a structure of fixed plus variable compensation. At the top management level, the fixed component is 40 per cent; at the senior management level it is 60 per cent. Further, we moved towards individualised compensation way back in 1994. We feel that most industries have no option but to do this on the basis of the performance of the business, the performance of the individual, the criticality of the role, and the market value and potential of the employee. As of today, there is no sign of salaries at the senior management level having stagnated. Salaries have been rapidly moving towards the best of the compensation in the rest of the world. Today, the approximate gap between compensation of top Indian executives their global peers will not be more than 20 per cent. We do not have sufficient evidence to agree that the compensation at senior level is increasing at a lower rate than at other levels. The impact of the slowdown on compensation will be evident only a few months from now. Sectors which need all-round talent as well as specialists, like finance, manufacturing, retail, utilities, healthcare technology services, and insurance etc. will offer premium compensation in the job market. ''We allow flexibility in the structure of pay'' The Standard Chartered compensation model
Every company needs to pay in order to retain talent. But in our case there is an add-on: in terms of the structuring of salary. We negotiate on the basis of cost to company. But this is divided in a certain way. One part is non-negotiable (basic and retirement benefits) which works out to 50 per cent of the package. The remaining part is flexible and you can structure it yourself. If you want a larger cash component, you can design your structure so. If you want more in 'kind' you can do that too, but the cost to company remains the same. If the employee wants to drive a Merc instead of a Maruti, it is his choice. It is like the trend in the West where the employee decides how to take his salary. But in general we have noticed a movement away from benefits to cash-oriented packages. This is the effect of changes in the tax regime. Today there is a increasing trend towards assesing salaries on the basis of their 'real value' to the employee. A structure based on this logic also eliminates comparisons at the same level. We also have a very handsome bonus programme. There are three linkages to it. One is the performance of Standard Chartered worldwide, the other is its performance in India, and the third is the employee's contribution to the Indian operations. People can earn upto 50-60 per cent of their cost to the company through bonus. In general, stock options will remain popular especially when market conditions improve. Employees will be paid for adding value to the company. The
BT-Omam Consultants Senior The
comprehensive salary tables of senior managers across the 100 companies
and the 13 sectors covered by the survey, with break-ups et al. The
perfect guide to check whether you’re overpaid or underpaid. Senior Manager Salaries: How The Sectors Stack up (Note: This is a PDF file. You need to have Adobe Acrobat Reader to view it. If you don't have one, download it now.)
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There's a supply overhand in the market,
and that makes hr-pros like Aadesh Goyal of Hughes happy. ''Several
dotcoms have gone belly up, and some it services companies are revising
their growth estimates. There is less competition for talent and this is
bound to be reflected in increments across levels.''
